Britain has ended a 10-year diplomatic boycott imposed on a controversial Indian politician accused of failing to stop anti-Muslim rioting that left at least a thousand people dead.

Sir James Bevan, the British high commissioner, spent 50 minutes with Narendra Modi, the chief minister of Gujarat, in the western Indian state's capital of Gandhinagar on Monday morning. The conversation is understood to have been focused on business and investment.

Bevan said the encounter had been "open, positive and constructive" and that under discussion were ways to "develop co-operation between the UK and Gujarat across a very broad range of fields, including education, science and innovation, energy and climate change, and trade and investment."

Modi, from the Hindu nationalist Bharatiya Janata party, is a divisive figure in India. Some see him as an extremist who sided with mobs who attacked Muslims in towns and cities across Gujarat, following a lethal fire supposedly started by Muslims on a train full of Hindu pilgrims in 2002 – a charge he denies.

Others, including some of the most powerful industrialists in India, say he is an effective, honest administrator who has introduced policies that have boosted development and reduced poverty during three successive terms as chief minister.

The 2002 violence led to a de facto travel ban imposed on Modi by the UK, the US and some European nations, as well as the boycott by all but junior officials. In 2005, Modi was refused a US visa as someone held responsible for a serious violation of religious freedom. The British decision to break ranks was described by local journalists as "a major boost to the pro-business leader's quest for mainstream acceptance".

Modi welcomed the announcement by posting a message on Twitter saying: "God is great."

Prof Shiv Visvanathan, a respected anthropologist involved with the legal campaign against Modi, said that the timing of the decision was surprising. "If they had waited a bit longer, the UK's record on human rights would have been better preserved," he said.

British officials in Delhi explained that a recent court decision that there was insufficient evidence to charge Modi for the violence of 2002, in which three British nationals died, had influenced the timing of the decision.

However, Indian commentators were scathing, accusing Britain of moving in order to ingratiate themselves with a potential leader of India. Modi consistently tops polls of India's most popular politicians and is spoken of as a prime ministerial candidate for the BJP, the main opposition. National elections are not due until 2014, but could come much sooner if coalition partners of the ruling Congress party withdraw their support.

"Strictly speaking, the British Foreign ... Office can argue that direct complicity has yet to be established. [Modi's] lack of contrition is outweighed by his rising profile as a possible ministerial candidate. Discretion is, after all, the better part of valour," wrote KC Singh in Outlook magazine.

Significant private sector investment in Gujarat from the UK and elsewhere also appears to have been a major factor. A British official in Delhi said: "This is about Gujarat, not about who is chief minister. One reason is to broaden and advance commercial interests. There are opportunity costs to not engaging. But we are looking forward not back. There is a large Gujarati immigrant community in Britain."

Bevan said he had reaffirmed "the British government's wish to ensure justice for the families of the three British citizens who were killed in the 2002 riots" and had raised broader questions of human rights in his discussion with Modi.

"This is about the power of the diaspora," said Visvanathan. "However, I am confident Modi's era will close. The law of the land will prevail." A former member of Modi's cabinet was recently convicted of murder and jailed for 28 years for having a leading role in the 2002 violence, in which as many as 2,500 may have died.

Witnesses described Maya Kodnani handing out swords to Hindus in the riots. She was later appointed as minister for women and child development. The Gujerati government has always maintained that the violence was spontaneous and did not involve local officials.